Capital volume 2 by Karl Marx

I’m in the process of reading some of the papers from The circulation of capital: essays on volume two of Marx’s ‘Capital’ (1998). A number of the papers point to the relevance of Marx’s Volume 2 to the current structures and ways in which modern capitalism is analysed. Other of the papers are helpful in explaining the dialectical method used by Marx in his analysis with the clear implication that that method is still essential today to analyse capitalism. So, I offer below an extract from the General Introduction as a preliminary guide to accessing this book.

My argument has been and remains that we need good guides to Marx. The reasons for this are becoming clearer:
– some modern authors build a bridge between the capitalism of Marx’s day and modern capitalism
– much of Marx’s work was published after his death and it needs editing and interpretation simply because it was rough drafts
– various translations from the original German are significantly different and some of the modern authors go to a great deal of trouble in sorting out those issues by comparing translations or going back to the original German
– Marx often wrote things in certain ways without explaining clearly why he was doing this. He didn’t like to point out where his argument was heading because that would prejudice the rigour of his analysis. This makes him harder to understand to us spoilt moderns who are used to being hand held along the way.
– Marx is deep and hard to understand anyway, so we need all the help we can get!

Marx’s Capital II, The Circulation of Capital: General Introduction
Christopher J. Arthur and Geert Reuten


Marx’s Capital Book II, ‘The Circulation Process of Capital’, is divided into three main parts. In Part One, Marx considers the metamorphoses capital undergoes in its circuit, namely as money capital, production capital and commodity capital. Of course, in normal conditions, this sequence is expanded into a regular imbricated set of sequences such that at any given time a different component of the total capital is present in each form.

In Part Two, Marx examines the circuit as a turnover. He shows how various components of capital (for example, so-called ‘fixed’ and ‘circulating’ complete their circuit at different rates; he argues that the influence of the circuit’s periodicity, and the varying ratios of such components, must affect the annual rate of surplus value. In both these parts capital as such is treated; but it is not considered as a system of capitals; however, the reproduction of any given capital is necessarily bound up with the reproduction and circulation of the total social capital.

Thus in Part Three, when Marx considers reproduction, he examines the revolution of this totality which necessarily includes not only the intertwining of each individual capital circuit with others but the whole circulation of commodities, those commodities bought by the workers to maintain themselves as well as those means of production capitals sell to each other. On this basis Marx distinguishes two ‘departments’ of production: those producing means of production and those producing means of consumption. This very division, as well as the analysis of the relations between these departments, is one of the enduring achievements of Marx’s work.

The relatively ‘technical’ character of much of Book II misled Engels, for one, into thinking that the argument concerns only relations between capitals; this is a grave mistake, for class relations are integral to capital and thus the matters dealt with here stand in intimate connection with its class basis; for example, capital’s concern with shortening turnover time has consequences for the intensity of labour, and the very choice of criterion for discriminating departments is rooted in the necessary reproduction of class relations (as Mattick points out in Chapter 2).

Even if this Book II study is still one at a relatively abstract level, the phenomenal expressions of the abstract categories developed may be visible to the extent that the concrete is a simple expression of the abstract categories – but not if in this process of concretion the system inverts its fundamental logic in its appearances (for example, in interest or ‘productivity of capital’) or reverses its dynamic (for example, in the case of tendencies and countertendencies). Tony Smith, in Chapter 4, shows how many of the categories developed in Marx’s Book II indeed find phenomenal expression; hence he can show how much of the Book II analysis can help us in understanding current developments in capitalism such as ‘flexible production’ …


We turn now to outlining the sequence of essays in this volume. We begin with two papers that pertain to Capital II as a whole. Paul Mattick shows how Book II fits into the overall structure of Capital. He argues that, just as the social form of commodity exchange that formed the starting point of the analysis in Book I was unmasked as the social form of an exploitative class relation obscured from view by market relations, so in Book II Marx considers how that form is structured in terms of the circulation of capital. The circulation of capital as a totality among economic categories gives rise to the idea of ‘the economy’ as an autonomous system of forces rather than a feature of a particular form of social life with a particular class structure. Marx’s analysis of reproduction in terms of the two departments, Mattick indicates, shows how the categories of the market lose their explanatory independence. In this context he shows the underconsumptionist explanation of economic crisis to be an untenable interpretation: effective demand is determined by capital accumulation. The schemes of reproduction then highlight the conditions for the possibility of economic crisis, along with the existence of capital as a class relation, rather than the issue of maldistribution of income or of disproportionality ­between departments of production.

In the following paper, Patrick Murray indicates that the purpose of Capital’s middle volume is to deepen the analysis of the double character of the commodity (use value and exchange value) of Book I and to show that what circulates in a capitalist economy is capital. In stressing that commodities in capitalism are use values which have the specific social form of capital, Murray convincingly takes distance from the view, held by Sweezy for example, that use value is irrelevant to Marx’s analysis. In this perspective his main focus is to debunk the ‘commerce and industry’ picture of the economy in capitalist society. This picture breaks down capital’s circulation into a generalized circulation of wealth whose basic forms are money and commodities, buying and selling (‘commerce’), accompanying a production process which, devoid of any determining social forces simply transforms material inputs to create new wealth (‘industry’­). Murray points out that, oddly, this pictures leaves out capital itself. In criticising it he shows how the categories of the commerce and industry picture prove conceptually too ‘thin’ to grasp the circulation of capital; likewise ‘thicker’ co-involvements of use value and value must be acknowledged in order to comprehend capital, its turnover and reproduction, productive and unproductive labour, and fixed and circulating capital. For example the phenomenon of the material reshaping of circulatory functions (see Smith, Chapter 4 on ‘lean production’ delivery systems) would be unintelligible on the basis of the ‘commerce and industry’ picture. In an appendix, Murray shows that Ernest Mandel erred in claiming that Marx came to the conclusion that labour in ‘service industries’ cannot be productive because it is not ‘concrete’ and does not result in a free-standing product.

The next paper, by Tony Smith, directly relates Part Two of Book II of Capital to recent trends in contemporary capitalism and its apologetic. Marx here derives a drive to lower circulation time and circulation costs. Analysing the move towards so-called ‘lean production’ in the perspective of Marx’s thesis, Smith concludes that this development corroborates the theory. Next he moves on to considering lean production from another perspective of the Book II analysis. Marx argues that in the circulation process capital accumulation is the independent variable and consumer activity a dependent variable. The defenders of lean production insist that, while this indeed holds true for the era prior to ‘lean production’, the reverse now obtains: information technologies allow manufacturers to trace changes in consumer desires accurately; and flexible production techniques allow firms to shift production rapidly in response to new consumer demands. So, they claim, true consumer sovereignty is now being instituted for the first time; the consumer is the sun around which the lean production system turns. If this claim is warranted, Smith allows, the Marxian perspective in this respect is refuted. However, building on Marx’s account in Book II of the place of consumer activity in the circulation process of capital, he argues that overcoming conflicts in the relation of capital to consumers requires a thoroughgoing social transformation far beyond the possibilities of ‘lean production’.

In his own paper, Chris Arthur calls attention to the significance of the introduction of the concept of ‘circuits of capital’. He examines Marx’s theory of the circuits of capital outlined in Part One (chs 1-4) of Book II. He traces the form of the circuit and shows how it may be viewed as the imbrication of three circuits. On this basis he argues that capital cannot be understood as a fixed form but only as the totality of functional forms through which it passes in its circuit; that is, capital exists as the identity-in-difference of all its functional forms, an identity established and maintained only in its movement through them. Such a view of the three circuits Marx distinguished he illuminates by outlining its background in Marx’s knowledge of Hegel’s Logic, and especially therein his theory of the syllogism which examines successively its mediation in the universal, the particular, and the individual judgments. In addition Arthur addresses a surprising feature of the recently published 1865 manuscript of Book II, namely the appearance in it of four circuits, not three.

Martha Campbell’s essay examines Marx’s explanation of the functions money must perform in the circulation of capital. In the first part of the paper she provides an important outline of the methodological frame of Marx’s monetary theory of Book II, explaining why Marx adopts particular assumptions for his analysis (an analysis that runs in fact throughout Book II). From his analysis of turnover Marx concludes that capital must occupy all three of its forms simultaneously; although the money form is no less transient than the others, Marx demonstrates that money hoards are required by the needs of circulation, and this is the foundation of his explanation of the credit system. Capitalists transform their hoards into interest-bearing capital in order to gain an additional share of the social surplus value. As a result money capital is concentrated in banks and in the bond and stock markets. Campbell argues that, by analysing capitalist reproduction apart from the credit system, Marx shows that the possibilities for its disruption are not limited to the problems resulting from debt and the conditions of credit. In proposing that the credit system develops so that capital in its money form will bring in surplus value, Marx is rejecting the claim that it develops to solve the problem of the shortage or high cost of gold money. Campbell concludes that the credit system complicates rather than simplifies capitalist reproduction and renders it more precarious.

In Chapter 7, Fred Moseley examines Marx’s reproduction schemes of Part Three of Capital II against the background of correspondence between Marx and Engels and the Theories of Surplus Value. He argues that the initial purpose of Marx’s reproduction schemes was to refute Adam Smith’s view that the price of the total commodity product of society is entirely resolved into wages plus profit plus rent; that is, entirely resolved into revenue with no component left to replace the constant capital consumed in production; he notes that Quesnay’s Tableau Economique could have helped Marx in so doing. Important to this refutation, Moseley indicates, is the distinction between money which functions as revenue and money which functions as capital. Emphasizing that Marx extensively criticised classical economics’ conception of capital as merely physical means of production, common to all types of economic systems, Moseley in the course of his paper contests Sraffian, or generally neo-Ricardian, interpretations of Marx which read his analysis in physical terms.

Finally Geert Reuten’s paper examines the same Part Three from the perspective of Marx’s method: is it akin to a modelling approach as we find it in modern orthodox economics, or does it rather fit into a systematic-dialectics methodology? More so than any other part of Marx’s work, his theory of reproduction influenced orthodox economics: it laid important foundations for its later macroeconomics and theory of the business cycle. Why particularly this text? In answering these questions the major part of Reuten’s paper is devoted to an examination of the systematic character of the exposition of Marx’s reproduction theory, focusing on its procedure in laying out assumptions. Reuten concludes that, while the text may not be incompatible with a systematic-dialectical methodology, it is certainly defective in that respect; rather the textual evidence favours the view that Marx, in this part, takes a particular modelling approach.

The papers brought together here show differences in historiographic and analytical emphasis and this makes them complementary studies. Certainly many questions concerning Marx’s Book II of Capital remain unanswered, an obvious example being why dialectics can be so prominent in Part One (Arthur) while trifling in Part Three (Reuten). All the authors agree that this work is crucial in understanding the trilogy of Capital and its method. Without this middle book we cannot grasp the juxtaposition of the analysis in the other two.

9 Responses to “Capital volume 2 by Karl Marx”

  1. 1 Arthur

    I haven’t read any of the essays on Volume II yet (except I assume Campbell 1997 ended up being a chapter).

    The remark about Marx using a “modelling” approach compatible with orthodox mainstream economics is interesting.

    I feel that it would be relatively easy to do a useful synopsis of volume II simply translating the tedious verbal expressions and arithmetical examples into simple algebra. This could make it dramatically easier for readers in the same sort of way that Galileo’s laws are much more readable in algebra (please add link to the Galileo reference you showed me).

    I think there would be much less risk of distorting Marx’s meaning than with Critique, Grundrisse and volumes I, III and IV.

    You might find it a useful exercise while reading volume II.

  2. 2 Bill Kerr

    The Chris Arthur essay, which I think is brilliant (see pp. 106-7 in particular), suggests that section one of volume 2, at least, needs to be read in Hegelian fashion.

    … Galileo’s laws are much more readable in algebra …

    Changing Minds by Andy diSessa. Ch 1: Computational Media and New Literacies – The Very Idea.

    As the chapter heading suggests Andy diSessa’a project was to enable a similar transformation using computer media. His particular version (Boxer) never really caught on but some of his theorising is first rate IMO. In Chapter one he points out that a new literacy has 3 foundations:
    – material (external signs, symbols)
    – cognitive (the symbols have to be learnable and learnt)
    – social (a society of those symbol users has to develop)

    My interpretation for this particular discussion is that the system of thinking developed by Hegel and then further by Marx, his methodology, is a barrier to understanding, it’s social mass has never become very large. Even though it uses the same symbols (German translated in various ways into English) the method of thinking about those symbols is different to “normal” (not linear).

    Di Sessa talks about how calculus has developed from being understood by one or two people (Newton, Leibniz) in the 17th C to its much broader (although still limited) adoption later through the education system. This process took 2 centuries. Leibniz’s notation (dy/dx) was easier to understand than Newtons and adopted for mass propagation. He asks if calculus was 10% harder then would it have been incorporated into mass education (at High school level)? Does that consideration apply to Marx’s methodology? [in addition, to it being marginalised by class hatred, which often takes the form of sophisticated obfuscation (Bohm-Bawerk, Mises etc.)] Hence, essays such as the Chris Arthur one are excellent IMO because they explain Marx better to the modern reader than Marx could explain to a modern reader. Not surprising really that Marxism might develop in some ways over a 150 year period.

  3. 3 Arthur

    Unfortunately the Google preview only includes the much more readable algebra and commentary (around pages 12-17) but excludes the original from Galileo (presumably p13 or p15 omitted).

    The omitted verbal non-algebraic version, even harder to read than volume II can be found here:

    I am suggesting that simply translating volume II to algebra would be helpful, in the same way that Galilean kinematics as easily taught at junior high school (even without calculus or “dialectics” that are needed for other aspects a little later).

  4. 4 Bill Kerr

    FWIW Engels advice to Victor Adler for reading volume 2:

    Volume II, Section I. Read Chapter I thoroughly, then you can take Chapters 2 and 3 more lightly; Chapter 4 more exactly again as it is a summary; 5 and 6 are easy and 6, especially, deals with secondary matters.

    Section II. Chapters 7-9 important. Specially important 10 and 11. Equally so 12, 13, 14. On the other hand 15, 16, 17 need only be skimmed through at first.

    Section III is a most excellent account of the entire circuit of commodities and money in capitalist society – the first since the days of the Physiocrats. Excellent in content but fearfully heavy in form because (1) it is put together from two versions which proceed according to two different methods and (2) because version No. 1 was carried to its conclusion by main force during a state of illness in which the brain was suffering from chronic sleeplessness. I should keep this right to the end, after working through Volume III for the first time. For your work too, it is not immediately indispensable.
    (follow link for his volume 3 advice as well)

  5. 5 jad

    David Harvey has just started a video lecture series on Vol. 2:

  6. 6 Arthur

    Pavel Maksakovsky “The Caplitalist Cycle” is now availabe for free download at:

    That web site has over 1.2 million books, with no downloading problems such as fakes, ads, captcha checks, upload requirements etc!

    Comprehensive collections on most subjects.

    Recently many download links diverted to… which has no DNS resolution from here. Simply change to… by deleting the 2 from dl2 in the address bar and hit return.

  7. 7 Arthur

    Typo, no bookfire, meant

  8. 8 Arthur

    BTW this online course could be of interest to all.

    I only just enrolled, missing deadlines for first week. Take a look now as enrolments might close very soon.

    Looks very interesting for general background on models relevant to economic and social issues including some of the sort that make me interested in agent based computational economics and econophysics.

    No prerequisites assumed and missing first week won’t matter.

    Uses NetLogo so Bill should be especially interested.

    Also the phenomena of free online university courses is itself of significant interest. (Not just lectures and course materials but marked assignments etc).

    I’m also doing the companion courses on Games Theory and Probabalistic Graphic Models. Those look significantly harder but Model Thinking is aimed at general interest.

  9. 9 tomb

    Hostess Must Return to ‘Liquidation Scenario’: Judge
    2013 Looks a Lot Like 1937 in Four Fearsome Ways
    By Amity Shlaes Nov 18, 2012 3:30 PM PT

    Will 2013 be 1937? This is the question many analysts are posing as the stock market has dropped after the U.S. election. On Nov. 16, they noted that industrial production, a crucial figure, dropped as well.

    In this case, “1937” means a market drop similar to the one after the re-election of another Democratic president, Franklin D. Roosevelt, in 1936.

    The drop wasn’t immediate in that case; it came in the first full year after the election. Industrial production plummeted by 34.5 percent. The Dow Jones Industrial Average dropped by half, from almost 200 in early 1937 to less than 100 at the end of March 1938.

    It’s hard to imagine stock indexes dropping by half today, or unemployment rising past 15 percent, as they did in the “depression within the Depression.” But the parallels are visible enough to be worth tracing. They have to do with the danger of big government, and can be captured in a few categories.

    — Pre-election spree that sets records. In the old days, federal spending amounted to about 19 percent or 19.5 percent of gross domestic product. That ratio was so reliable that economists took it as a given, the American normal, from which divergence was unnatural and temporary. By the old 19 percent rule, federal spending would have dropped back once the worst of the 2008 economic crisis passed.

    That didn’t happen. Instead the federal government continued to spend. Most important, even in 2012, when the crisis was long past, the government went on a spree, spending the equivalent of 24.3 percent of the economy, more than the 24.1 percent for the year earlier.

    In 1936, a similar barrier was breached. Up until 1936, federal spending flowed at smaller levels than the spending by states and towns combined, with wartime being the exception. Roosevelt slowly ratcheted up the outlays, and in 1936, Washington spent more than the states and towns. This shift was dizzying for a country based on the principle of federalism, of strong states.

    — Bath of cold water afterward. After this year’s election, President Barack Obama made it clear that budgeting was his priority: “I’m ready and willing to make big commitments to make sure that we’re locking in the kind of deficit reductions that stabilize our deficit, start bringing it down, start bringing down our debt. I’m confident we can do it.”

    Roosevelt too opened his second term on a sober budget- cutting note. The president, wrote journalist Anne O’Hare McCormick in 1937, was like “the Dutch householder who carefully totes up his accounts every month and who is really annoyed now that he is bent on balancing the budget, that Congress can’t stop spending.”

    — Fearsome attack on the status quo. In his first news conference on Nov. 14, Obama went out of his way to make clear his tax increases would fall on the rich: “What I’m concerned about is not finding ourselves in a situation where the wealthy aren’t paying more or aren’t paying as much as they should.”

    Roosevelt was also ferocious, telling the old guard: “I should like to have it said of my first administration that in it the forces of selfishness and of lust for power met their match. I should like to have it said of my second administration that in it these forces met their master.”

    When Roosevelt followed through in 1937, both with high taxes and his effort to pack the Supreme Court with more progressives, markets shivered.

    — Fallout from first-term legislation. Obama signed his health-care act in 2010, postponing much of its enforcement until 2013, after the election. Now that the effects of the act are so proximate, markets are wondering whether they or investors can handle the changes demanded. Roosevelt’s equivalents were threefold: Social Security, the Wagner Act and a new Federal Reserve law, the Banking Act of 1935, all passed well before the election. The last law gave the Fed a new tool, the easy ability to order changes in reserve requirements for banks.

    In all three cases, the full effects of the laws weren’t felt until after the election. It was only in 1937 that Americans had to pay into Social Security, diverting cash from the economy. And it was only in 1937 that John L. Lewis, the labor leader, pushed his hardest for wage increases and strikes, forcing companies to pay higher wages than they could afford. In 1936 and 1937, the Fed increased reserve requirements, effectively doubling them. The consequence of these laws was reduced available cash, increased uncertainty and lower business confidence.

    The obvious question is why an announcement by Obama or Roosevelt to cut back just after the election doesn’t reassure those who dislike government expansion.
    Wary Markets

    The answer is that the markets, which observe a giant march forward and then a step backward, don’t believe the step back is permanent. Giants are giants. Expansionists tend to revert to expanding government, as FDR did, most drastically, in World War II. The mandate matters more than the austerity chatter.

    Benjamin Anderson, the chief economist at Chase National Bank in the 1930s, tried to capture the problem of the big- government president by titling one of his books “When Government Plays God.” His advisers warned him to suppress the title, arguing it might offend. Anderson shifted to the more banal: “Economics and the Public Welfare.” But Anderson’s phrase still reverberates: A government that “plays God,” or at least “plays powerhouse,” can spook markets and employers, whatever the decade.

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